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back to index backEUROtalk March,  2017


Car Manufacturing Gloom: The Pro-EU Campaign's Worst Nightmare Becomes Reality As Hard Brexit Looms

Oh, Prime Minister May, how the mighty will fall. Brexit fears just got embalmed, secured in bulletproof glass, and showcased for the public to throw rotten veg at. It's the automotive sector, an industry targeted for economic vigour post-Brexit by those that campaigned hard for Britain to sever ties with Europe, that seems, with every passing day, to push back at potential positives and deliver damning economic gloom.

March 1st started with a beautiful sunrise, the prospect of blue skies and mild temperatures; early signs of spring. But Ford bosses would have preferred thick grey clouds and the sort of rain that gets through your raincoat and soaks you to the bone. Brexit weather for those pro-EU. Yes, Ford bosses, after revealing they had no idea what they're going to do after they cease production of the Jaguar engine in Bridgend, were however confident of cutting more than 1,000 jobs due to a scale-back of its production.

Why would Ford suddenly want to scale back production, cut jobs and not prioritise a replacement business plan for the Jaguar engine in the wake of its Bridgend production facility closure? The simple answer is Brexit.

Trade union Unite certainly blamed Brexit. Its General Secretary Len McCluskey said: "I appeal again to the government to make it categorically clear without delay that there will be tariff-free access to the single market and customs union, because the uncertainty the UK's automotive sector is enduring is having damaging real life consequences now, before talks have even begun. The prime minister must act now to because the very future of UK manufacturing, including car making, is at stake."

Indeed, the UK leaving the EU's single market could, says Society of Motor Manufacturers and Traders (SMMT) Chief Executive Mike Hawes "threaten the viability of the industry. A tariff-free single market is absolutely critical in order for Britain to remain competitive.

"We need government to deliver a deal which includes participation in the customs union to help safeguard EU trade, trade that is tariff-free and avoids the non-tariff and regulatory barriers that would jeopardise investment, growth and consumer choice. Achieving this will not be easy and we must, at all costs, avoid a cliff-edge and reversion to WTO tariffs."

Ford have hardly allayed fears. And Nissan could follow suit. After saying it would expand in the North East, it's now suggesting it might have to realign its strategy as a result of Brexit which could remove the UK from its thinking.

Its Head of European Manufacturing, Colin Lawther, told the House of Common's International Trade Committee on February 27th that it is vital to the UK that it stays within the European Union's customs union. Failure for May and her government to achieve this would potentially see Nissan change its plans which could see the carmaker rework its strategy before the Brexit process is complete.

Four months ago, Brexit looked like a good thing as Nissan announced it would build two flagship models in Sunderland, safeguarding 7,000 jobs in the wake of the Brexit result. But now, it isn't so sure.

As one commentator said, Nissan's statements were a depressing reminder of the government's "stubborn refusal to commit to our trading arrangements" and the problems this was causing. UK manufacturing needs clarity. And it needs assurances. That means answering the questions about the single market and the customs union.

It's not about safeguarding borders against safeguarding the single market. Both can be protected. It's about what works. Take an average car built in the UK. It has approximately 6,000 parts, the majority of which come from the European Union. It's possible for parts to move through multiple countries before reaching their destination in the UK.

"The margins the industry operates on are wafer thin "¦ so any tariff is immediately going to be a critical challenge to a company, especially when their competitors may not be subject to those tariffs," said the SMMT's Hawes.

That's not all as "hard" Brexit could bring about time-consuming delays as additional customs checks, red tape and other factors slow the process. SMMT members have revealed their fear that the UK will struggle to compete with its EU counterparts as a result of Brexit adding costs and slowing down the production process.

The doom and gloom had fuel added to its fire from Germany as former German Transport Minister and now Head of the German Association of the Automotive Industry, Matthias Wissmann, said the UK's automotive industry would die if the country lost access to the single market.

"If there's a "˜hard Brexit' then we will see a shift to central and south-eastern Europe" where "very attractive" low labour costs would encourage carmakers to set up their European base. "The longer the period of uncertainty lasts, the longer people will be reluctant to invest," he said.

Source: Manufacturing and Engineering Magazine - GAI


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